Westpac has just released its monthly Leading Index of Australian growth in conjunction with the Melbourne Institute. This index is set up to give an indication of the likely level of growth in 3 to 9 months time. Westpac – MI said,
The annualised growth rate of the Westpac–MelbourneInstitute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was2.9% in October 2012, around its long term trend of 2.7%.The annualised growth rate of the Coincident Index, whichgives a pulse of current activity, was 2.5%, below its longterm trend of 3.0%.
Last month we were encouraged that the growth rate in the Indexwas lifting and pointing to a stronger growth pace than we had factored into our forecasts. Unfortunately this lift in the growthpace has now faded and is more in line with our views around thelikely growth momentum in the Australian economy in 2013.Westpac expects growth in 2013 of 2.75% down from 3% in 2012.
While we are expecting a modest uplift in the contribution to growth from the consumer; housing and non-mining investment in response to the interest rate cuts we have seen through 2012 and the further cut we envisage in early 2013 growth is still likely to falter as the contribution to growth from the mining boomfades in 2013
Westpac thinks the case for another cut when the RBA meets again in February is clear.
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